Filmmakers with abandoned movie projects get tax relief

Filmmakers, who could not complete their movies or had to abandon them mid-way, can now have some relief as the Income Tax department has decided to do away with a provision of claiming tax on such projects.

The Central Board of Direct Taxes, the apex policy-making body of the department, earlier this month brought out a directive stating that in case of an abandoned feature film, the stipulated Rule 9A of the I-T Act will not be applicable.

The cost of production of such a project will be treated as “revenue” expenditure, meaning a work that led them to loss in business.

Rule 9A, in the I-T law, allows for deduction of tax (relief on taxable income) in respect of the cost of production of a feature film which is duly certified by the censor board.

“The matter has been examined in light of judicial decisions on this subject… Consequently, it is clarified that Rule 9A does not apply to abandoned feature films and that the expenditure incurred on such films is not to be treated as a capital expenditure (gain in business).

“The cost of production of an abandoned feature film is to be treated as revenue expenditure and allowed as per the provisions of Section 37 of the Income Tax Act,” the CBDT order, issued for implementation to all tax offices in the country, said.

The Board also asked the taxman that this being a “settled” issue now, “no appeals may henceforth be filed on this ground by the officers of the department and appeals already filed, if any, on this issue before various courts/tribunals may be withdrawn or not pressed upon”.

A senior official said the latest order came after some judgements issued by the courts earlier had ruled in favour of the producers and filmmakers who had sought that the expenditure made on an abandoned film should be treated as “revenue” expense rather than a “capital” expense, thereby seeking relief from paying a higher tax.

“It was also found that the taxman, in certain cases of abandoned films, did not allow for deduction under Rule 9A and the case was just treated in a regular manner as assessed for a completely made or finished feature film. This was causing a lot of hardship and litigation for the assesse and hence it was decided to take a holistic and just view on the subject,” the official said.

Inputs by PTI